The long-awaited fourth set of listing standards for the ChiNext Board has finally been introduced. On April 10, the China Securities Regulatory Commission (CSRC) officially released the "Opinions on Deepening the Reform of the ChiNext Board to Better Serve the Development of New Quality Productive Forces," marking the formal implementation of the new standards.
Specifically, the newly added fourth set of listing standards includes two main indicators: The first is an "estimated market value of no less than 3 billion yuan, with revenue in the most recent year no less than 200 million yuan and a compound annual revenue growth rate of no less than 30% over the past three years." This standard is primarily aimed at enterprises in emerging industries. The second is an "estimated market value of no less than 4 billion yuan, with revenue in the most recent year no less than 200 million yuan, and cumulative R&D investment over the past three years no less than 100 million yuan, accounting for no less than 15% of revenue." This standard mainly applies to companies in future-oriented industries.
This is the first time since the introduction of the third set of standards that the ChiNext Board has added listing criteria that do not require profitability. In fact, market expectations for the fourth set of standards had been building. In March, CSRC Chairman Wu Qing indicated that as part of the ongoing reform of the ChiNext Board, a more precise and inclusive set of listing standards would be introduced to strengthen support for companies in new industries, new business models, and new technologies, as well as high-quality innovative and entrepreneurial enterprises in sectors like modern services and new types of consumption.
With the increased inclusiveness of the ChiNext Board, concerns have arisen about potential competition with the STAR Market. According to a CSRC spokesperson, the newly added fourth set of standards for the ChiNext Board focuses on the introduction, transformation, and application of cutting-edge technologies, creating a distinction from the STAR Market's listing standards in terms of indicator design, applicable industry scope, and stage of industrial development. The CSRC stated that it will guide the Shanghai and Shenzhen stock exchanges to actively leverage the unique characteristics and advantages of the two boards, promoting coordinated development and synergy to further expand the capital market's coverage in serving the real economy and strive for a reform effect where "1+1>2."
However, increased inclusiveness does not mean a substantive lowering of review thresholds. To address the uncertainty risks associated with unprofitable but high-growth enterprises, companies that are not profitable at the time of their initial public offering will be marked with a special identifier "U" to continuously alert investors to the risks. Furthermore, their controlling shareholders, actual controllers, and key management face restrictions, being prohibited from reducing their pre-IPO shareholdings for three full fiscal years following the listing.
Another notable institutional exploration in this reform is the pilot program allowing local governments to submit information on enterprises planning to issue shares and list to the CSRC and the Shenzhen Stock Exchange. This is because local governments have a better understanding of the operations, compliance, and reputation of enterprises within their jurisdictions. Using information submitted by local governments as a reference can help review departments gain a more timely and comprehensive understanding of potential listing candidates, thereby improving the quality and efficiency of the review and registration process.
It is worth noting that this pilot program is limited to enterprises that have already applied for filing of IPO tutoring and intend to apply under the third or fourth set of ChiNext Board listing standards. Participation in the pilot is not mandatory. The CSRC clearly stated that local government submission of information is not a mandatory procedure for an enterprise's IPO. The CSRC, the Shenzhen Stock Exchange, and local governments will not set targets for the number of enterprises whose information is submitted. Local governments at various levels must not compel lower-level governments to submit enterprise information or require enterprises to treat government-submitted information as a necessary step for listing. For enterprises whose information has not been submitted by a local government, the CSRC and the Shenzhen Stock Exchange will continue to conduct the review and registration process according to existing procedures.
With the implementation of this fourth set of standards, attention is now turning to which company will be the first to utilize this new pathway.
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